(Jan-30) The FED recently decided to keep interest rates unchanged. This decision comes amid ongoing concerns about inflation, which remains above the Fed’s 2% target. The current federal funds rate is maintained at a range of 4.25% to 4.5%. President Trump has criticized the Fed’s decision, arguing that lower rates are necessary to boost the economy. However, the Fed is taking a cautious approach, assessing the impact of inflation and potential economic policies.
(Jan-27) The market expects the ECB to cut its benchmark deposit rate by 25bps to 2.75% on Thursday[30th of Jan]. This would be the fourth consecutive rate cut as the ECB aims to support the eurozone economy and manage inflation.
(Jan-27) The SARB is expected to cut interest rates by 25bps this week[30th of Jan] following last weeks softer-than-expected inflation print. Currently repo is at 7.75%.
(Jan-28) The market has stabilized, and the rand has improved following the DA reaffirmation of their commitment to the GNU. This comes after weekend reports suggested instability within the GNU due to the President signing a new law facilitating state land expropriation.
(Jan-29) ZAR still under pressure until SARB announcement.
(Jan-30)
President C. Ramaphosa convened a Cabinet Lekgotla on January 29-30, 2025, to review government progress and set the agenda for the seventh administration. The focus was on finalizing the Medium-Term Development Plan (MTDP) 2024/2029, with priorities like inclusive growth, job creation, poverty reduction, and building a capable state. Key discussions included practical actions for MTDP priorities, economic and global outlooks, reforms in global institutions, and funding for SMMEs and students in the “missing middle.” The outcomes will shape policies announced during the State of the Nation Address on February 6, 2025. The Lekgotla also addressed South Africa’s G20 Presidency, emphasizing global economic stability and policy influence.
SA has called for an immediate ceasefire in the DRC amid intense fighting. Eleven SA soldiers were killed, prompting evacuation efforts. Diplomatic efforts are ongoing to push for a ceasefire and humanitarian access, with concerns over civilian casualties in Goma remaining high.
By sizwe Mfayela - Institutional Sales Specialist (Jan-30)
By Thuto Mukena - Institutional Sales Specialist (Jan-30)
The Fed held steady at 4.25% as widely expected, with Chair Powell striking a balanced tone—acknowledging the economy’s resilience and easing inflation while signaling no rush to adjust policy. Markets took it in stride, with the local currency extending gains and closing firmer at R18.5131/$. In options space, front-end vols softened, with 1-week implied shedding 98bps, the biggest drop amongst front end implied vols. That said, the tenor is still pricing in some uncertainty and continues to trade at a premium to the 1-month implied vol, with the spread currently sitting at 0.95 vol p.p. Heading into today’s session, attention turns to the SARB rate decision, where consensus calls for a 25bps cut to 7.5%. While the outcome is largely expected, markets will be paying close attention to the vote split and the committee’s tone for clues on the policy path ahead.
It was a see-saw session across both EM and G10 FX, with mixed performance on the day. The ZAR and COP took the top spots among gainers, while the RUB lagged at the bottom of the leaderboard. 1-week implied vols eased across both spectrums as the Fed rate outcome faded into the background, with uncertainty receding. In EM, USD/MXN and USD/CNH 1-week implied vols dipped 72bps and 32bps, respectively. In G10, implied vols tracked spot moves across most pairs, USD/CHF and AUD/USD 1-week implied vols shedding 31bps and 120bps, respectively, from the open.